Trump tax talk, China data spur risk rally

European shares rose to within striking distance of their highest levels in more than a year on Friday while the dollar was buoyant as investors cheered upbeat Chinese trade data and hopes of business-friendly tax cuts in the United States.

President Donald Trump said on Thursday that in coming weeks he would announce something "phenomenal" in terms of tax although he offered no further details.

Renewed speculation that Trump's economic policies will help boost economic growth and inflation pushed US Treasury yields higher and lifted the dollar.

Strong Chinese trade numbers of Friday added to a sense that inflationary pressures could be stirring.

Europe's STOXX 600 rose 0.2 per cent and was poised to end the week about 1 per cent higher.

Healthy corporate results and the continued uptick in regional dealmaking which is seeing its strongest start to the year in more than a decade also helped underpin valuations.

"President Trump promising tax reform in 2-3 weeks (potentially at the February 28 address to Congress) has added to risk bullish sentiment," said Morgan Stanley strategists in a note to clients.

Wall Street's three main indexes notched record highs overnight.

Broad bullish sentiment was evident in investment flows too with investors pumping $US13 billion into bonds, $US6 billion into equities and even $US2 billion into gold, in the past week according to latest data from Bank of America Merrill Lynch and fund tracker EPFR.

On the political front, Trump seemed to change tack and said he would honour the longstanding "one China" policy during a phone call with China's leader, a major diplomatic boost for Beijing which brooks no criticism of its claim to neighbouring Taiwan.

Focus now shifts to a meeting later on Friday between Trump and Japan's Prime Minister Shinzo Abe in which Abe is expected to propose a new cabinet level framework for US-Japan talks on trade, security and macroeconomic issues, including currencies.

The dollar was up 0.3 per cent against the yen, up more than 1 per cent for the week.

The dollar index, which tracks the greenback against a basket of six major currencies, added 0.2 per cent on the day to 100.8, on track to gain 0.8 per cent for the week.

In commodities, crude oil prices extended gains supported by strong Chinese crude imports and OPEC-led production cuts, although ample US fuel inventories still weighed on the market.

Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $YS55.68 per barrel at 0807 GMT, up 5 cents from their previous close.

US West Texas Intermediate (WTI) crude futures CLc1 were up 3 cents at $US53.03 a barrel.